Chapter 4 Solutions

Chapter 4 Process Costing Solutions to Questions4-1 A process costing system should be used in situations where a homogeneous product is produced on a continuous basis.4-2 Job-order and processing costing are similar in the following ways:1.Job-order costing and process costing havethe same basic purposes—to assignmaterials, labor, and overhead cost toproducts and to provide a mechanism forcomputing unit product costs.2.Both systems use the same basicmanufacturing accounts.3.Costs flow through the accounts in basicallythe same way in both systems.4-3Cost accumulation is simpler under process costing because costs only need to be assigned to departments—not individual jobs. A company usually has a small number of processing departments, whereas a job-order costing system often must keep track of the costs of hundreds or even thousands of jobs.4-4In a process costing system, a Work in Process account is maintained for each processing department. 4-5The journal entry to record the transfer of work in process from the Mixing Department to the Firing Department is:Work in Process, Firing (XXXX)Work in Process, Mixing (XXXX)4-6The costs that might be added in the Firing Department include: (1) costs transferred in from the Mixing Department; (2) materials costs added in the Firing Department; (3) labor costs added in the Firing Department; and (4) overhead costs added in the Firing Department. 4-7Under the weighted-average method, equivalent units of production consist of units transferred to the next department (or to finished goods) during the period plus the equivalent units in the department’s ending work in process inventory.4-8The company will want to distinguish between the costs of the metals used to make the medallions, but the medals are otherwise identical and go through the same production processes. Thus, process costing is ideally suited for the company’s needs.The Foundational 151. The journal entries would be recorded as follows:Work in Process—Mixing .................................120,000Raw Materials Inventory ............................120,000 Work in Process—Mixing .................................79,500Wages Payable .........................................79,5002. The journal entry would be recorded as follows:Work in Process—Mixing .................................97,000Manufacturing Overhead ...........................97,0003. The ―units completed and transferred to finished goods‖ is computedas follows:Pounds Work in process, June 1 .......................................... 5,000 Started into production during the month ................. 37,500 Total pounds in process ........................................... 42,500 Deduct work in process, June 30 .............................. 8,000 Completed and transferred out during the month ...... 34,5004. and5.The equivalent units of production for materials and conversion are computed as follows:Equivalent UnitsMaterials Conversion Units transferred out ....................................34,500 34,500 Work in process, ending:8,000 units × 100% ....................................8,0008,000 units × 40% ..................................... 3,200 Equivalent units of production ........................42,500 37,700The Foundational 15 (continued)6. and7.Materials Conversion Cost of beginning work in process ................ $ 16,000 $ 12,000 Cost added during the period ....................... 120,000 176,500* Total cost .................................................... $136,000 $188,500 * $79,500 + $97,000 = $176,5008. and 9.The cost per equivalent unit for materials and conversion is computed as follows:Total cost (a) ......................................... $136,000 $188,500Equivalent units of production (b) ........... 42,500 37,700Cost per equivalent unit (a) ÷ (b) ........... $3.20 $5.0010. and 11.The cost of ending work in process inventory for materials andconversion is computed as follows:Materials Conversion Total Equivalent units of production (a) ... 8,000 3,200Cost per equivalent unit (b) ............ $3.20 $5.00Cost of ending work in processinventory (a) × (b) .................... $25,600 $16,000 $41,600* * $41,600 is the June 30 balance in the Work in Process—MixingDepartment T-account.12. and 13.The cost of materials and conversion transferred to finished goods is computed as follows:Materials Conversion Total Units transferred out (a) .....................34,500 34,500Cost per equivalent unit (b) ................$3.20 $5.00Cost of units transferred to finishedgoods (a) × (b) .............................$110,400 $172,500 $282,900The Foundational 15 (continued)14. The journal entry to record the transfer of costs from Work in Processto Finished Goods would be recorded as follows:Finished Goods............................................ 282,900Work in Process—Mixing ....................... 282,900 15. The total cost to be accounted for and the total cost accounted for is:Costs to be accounted for:Cost of beginning work in process inventory ....... $ 28,000Costs added to production during the period ...... 296,500Total cost to be accounted for ........................... $324,500 Costs accounted for:Cost of ending work in process inventory ........... $ 41,600Cost of units completed and transferred out ....... 282,900Total cost accounted for .................................... $324,500Exercise 4-1 (20 minutes)a. To record issuing raw materials for use in production:Work in Process—Molding Department ......... 28,000Work in Process—Firing Department ............. 5,000Raw Materials ....................................... 33,000b. To record direct labor costs incurred:Work in Process—Molding Department ......... 18,000Work in Process—Firing Department ............. 5,000Wages Payable ..................................... 23,000 c. To record applying manufacturing overhead:Work in Process—Molding Department ......... 24,000Work in Process—Firing Department ............. 37,000Manufacturing Overhead ....................... 61,000 d. To record transfer of unfired, molded bricks from the MoldingDepartment to the Firing Department:Work in Process—Firing Department ............. 67,000Work in Process—Molding Department ... 67,000e. To record transfer of finished bricks from the Firing Department to thefinished goods warehouse:Finished Goods............................................ 108,000Work in Process—Firing Department ...... 108,000 f. To record Cost of Goods Sold:Cost of Goods Sold ...................................... 106,000Finished Goods ..................................... 106,000Exercise 4-2 (10 minutes)Weighted-Average MethodEquivalent Units Units transferred out .................................... 410,000 410,000 Work in process, ending:30,000 units × 70% ................................... 21,00030,000 units × 50% ................................... 15,000 Equivalent units of production ....................... 431,000 425,000Exercise 4-3 (10 minutes)Weighted-Average Method1.Materials Labor Overhead Cost of beginning work in processinventory ................................... $ 14,550 $23,620 $118,100 Cost added during the period ........ 88,350 14,330 71,650 Total cost (a) ............................... $102,900 $37,950 $189,750 Equivalent units of production (b) . 1,200 1,100 1,100 Cost per equivalent unit (a) ÷ (b) . $85.75 $34.50 $172.50 2.Cost per equivalent unit for materials ..... $ 85.75Cost per equivalent unit for labor ........... 34.50Cost per equivalent unit for overhead ..... 172.50Total cost per equivalent unit ................. $292.75Exercise 4-4 (10 minutes)Weighted-Average MethodMaterials Conversion Total Ending work in process inventory:Equivalent units of production ................. 300 100Cost per equivalent unit .......................... $31.56 $9.32Cost of ending work in process inventory . $9,468 $932 $10,400 Units completed and transferred out:Units transferred to the next department . 1,300 1,300Cost per equivalent unit .......................... $31.56 $9.32Cost of units transferred out .................... $41,028 $12,116 $53,144Exercise 4-5 (10 minutes)Baking Department Cost ReconciliationCosts to be accounted for: Cost of beginning work in process inventory . $ 4,830 Costs added to production during the period . 25,650 Total cost to be accounted for ...................... $30,480Costs accounted for as follows: Cost of ending work in process inventory ...... $ 1,120 Cost of units completed and transferred out .. 29,360 * Total cost accounted for ............................... $30,480*The cost of units completed and transferred out can be deduced as follows:Cost of beginning Costs added Cost of ending Cost of units work in process +to production =work in process +completed and inventory during the period inventory transferred outCost of $4,830 + $25,650 = $1,120 + unitscompleted andtransferred out Cost of unitscompleted and = $4,830 + $25,650 - $1,120transferred outCost of unitscompleted and = $29,360transferred outExercise 4-6 (15 minutes)Weighted-Average Method1. Materials Labor Overhead Units transferred to the nextdepartment ...................................... 790,000 790,000 790,000 Work in process, ending:Materials:50,000 units × 60% complete ........ 30,000Labor and overhead:50,000 units × 20% complete ........ 10,000 10,000 Equivalent units of production ............. 820,000 800,000 800,000 2. Materials Labor Overhead Cost of beginning work in process .... $ 68,600 $ 30,000 $ 48,000 Cost added during the period ........... 907,200 370,000 592,000 Total cost (a) .................................. $975,800 $400,000 $640,000 Equivalent units of production (b) .... 820,000 800,000 800,000 Cost per equivalent unit (a) ÷ (b) ..... $1.19 $0.50 $0.80Exercise 4-7 (30 minutes)Weighted-Average Method1. Equivalent units of productionPulping Conversion Transferred to next department ........................ 146,000 146,000 Ending work in process:Pulping: 6,000 units x 100% complete ........... 6,000Conversion: 6,000 units x 75% complete ........ 4,500 Equivalent units of production .......................... 152,000 150,5002. Cost per equivalent unitPulping Conversion Cost of beginning work in process ................ $ 1,500 $ 400 Cost added during the period ....................... 59,300 22,100 Total cost (a) ..............................................Equivalent units of production (b) ................ 152,000 150,500 Cost per equivalent unit, (a) ÷ (b) ............... $0.40 $0.14953. Cost of ending work in process inventory and units transferred outPulping Conversion Total Ending work in process inventory:Equivalent units of production... 6,000 4,500Cost per equivalent unit ........... $0.40 $0.1495Cost of ending work in processinventory ............................... $2,400 $673 $3,073 Units completed and transferred out:Units transferred to the nextdepartment ........................... 146,000 146,000Cost per equivalent unit ........... $0.40 $0.1495Cost of units completed andtransferred out ....................... $58,400 $21,827 $80,227Exercise 4-7 (continued)4. Cost reconciliationCosts to be accounted for:Cost of beginning work in process inventory($1,500 + $400) ........................................ $ 1,900Costs added to production during the period($59,300 + $22,100) .................................. 81,400Total cost to be accounted for ....................... $83,300 Costs accounted for as follows:Cost of ending work in process inventory ...... $ 3,073Cost of units completed and transferred out .. 80,227Total cost accounted for ............................... $83,300Exercise 4-8 (10 minutes)Work in Process—Mixing .......................................330,000 Raw Materials Inventory ..................................330,000 Work in Process—Mixing .......................................260,000Work in Process—Baking .......................................120,000 Wages Payable ................................................380,000 Work in Process—Mixing .......................................190,000Work in Process—Baking .......................................90,000 Manufacturing Overhead ..................................280,000 Work in Process—Baking .......................................760,000 Work in Process—Mixing ..................................760,000 Finished Goods .....................................................980,000 Work in Process—Baking ..................................980,000Exercise 4-9 (20 minutes)Weighted-Average Method1. Computation of equivalent units in ending inventory:Materials Labor OverheadUnits in ending inventory .......... 1,500 1,500 1,500Percent completed ................... 90% 40% 40% Equivalent units of production ... 1,350 600 6002. Cost of ending work in process inventory and units transferred out:Materials Labor Overhead Total Ending work in process inventory:Equivalent units ofproduction ................. 1,350 600 600Cost per equivalent unit $24.00 $7.00 $14.00Cost of ending work inprocess inventory ....... $32,400 $4,200 $8,400 $45,000 Units completed and transferred out:Units transferred to thenext department ......... 18,000 18,000 18,000Cost per equivalent unit $24.00 $7.00 $14.00Cost of units completedand transferred out ..... $432,000 $126,000 $252,000 $810,000 3. Cost reconciliation:Total cost to be accounted for ........................... $855,000Costs accounted for as follows:Cost of ending work in process inventory ...... $ 45,000Cost of units completed and transferred out .. 810,000Total cost accounted for ............................... $855,000Exercise 4-10 (10 minutes) Weighted-Average Method1.Kilograms ofCement Work in process, May 1 ........................................... 80,000 Started into production during the month ................. 300,000 Total kilograms in process ....................................... 380,000 Deduct work in process, May 31 .............................. 50,000 Completed and transferred out during the month ...... 330,0002. Equivalent Units (EU)Materials Conversion Units transferred out ................................ 330,000 330,000 Work in process, ending:Materials: 50,000 kilograms × 40% ........ 20,000Conversion: 50,000 kilograms × 10% ..... 5,000 Equivalent units of production ................... 350,000 335,000Exercise 4-11 (30 minutes)Weighted-Average Method1. Materials ConversionUnits transferred to the next process ............... 300,000 300,000 Ending work in process:Materials: 40,000 units × 50% complete ....... 20,000Conversion: 40,000 units × 25% complete .... 10,000 Equivalent units of production ......................... 320,000 310,0002. Materials ConversionCost of beginning work in process .................. $ 56,600 $ 14,900 Cost added during the period ......................... 385,000 214,500 Total cost (a) ................................................ $441,600 $229,400 Equivalent units of production (b) ...................Cost per equivalent unit (a) ÷ (b) ................... $1.38 $0.743. Materials Conversion TotalEnding work in process inventory:Equivalent units of production(see above) ........................ 20,000 10,000 Cost per equivalent unit (seeabove) ............................... $1.38 $0.74 Cost of ending work in processinventory ............................ $27,600 $7,400 $35,000 Units completed and transferred out:Units transferred to the nextprocess .............................. 300,000 300,000 Cost per equivalent unit(see previous exercise) ........ $1.38 $0.74 Cost of units completed andtransferred out ................... $414,000 $222,000 $636,000Exercise 4-12 (10 minutes) Weighted-Average MethodMaterialsLabor & OverheadPounds transferred to the Packing Departmentduring May* ........................................................ 490,000 490,000 Work in process, May 31:Materials: 20,000 pounds × 100% complete ......... 20,000Labor and overhead: 20,000 pounds × 90%complete .......................................................... 18,000 Equivalent units of production ................................ 510,000 508,000 * 30,000 + 480,000 – 20,000 = 490,000Problem 4-13A (45 minutes)Weighted-Average Method1. Equivalent Units of ProductionMaterials Conversion Transferred to next department* ...................... 380,000 380,000 Ending work in process:Materials: 40,000 units x 75% complete ......... 30,000Conversion: 40,000 units x 25% complete ...... 10,000 Equivalent units of production .......................... 410,000 390,000 *Units transferred to the next department = Units in beginning work in process + Units started into production − Units in ending work inprocess = 70,000 + 350,000 − 40,000 = 380,0002. Cost per Equivalent UnitMaterials Conversion Cost of beginning work in process ................ $ 86,000 $ 36,000 Cost added during the period ....................... 447,000 198,000 Total cost (a) ..............................................Equivalent units of production (b) ................ 410,000 390,000 Cost per equivalent unit, (a) ÷ (b) ............... $1.30 $0.603. Cost of Ending Work in Process Inventory and Units Transferred OutMaterials Conversion Total Ending work in process inventory:Equivalent units of production(materials: 40,000 units x 75%complete; conversion: 40,000units x 25% complete) ....... 30,000 10,000Cost per equivalent unit ....... $1.30 $0.60Cost of ending work in processinventory ........................... $39,000 $6,000 $45,000 Units completed and transferred out:Units transferred to the nextdepartment ....................... 380,000 380,000Cost per equivalent unit ....... $1.30 $0.60Cost of units completed andtransferred out ................... $494,000 $228,000 $722,000Problem 4-13A (continued)4. Cost ReconciliationCosts to be accounted for:Cost of beginning work in process inventory($86,000 + $36,000) .................................. $122,000Costs added to production during the period($447,000 + $198,000) .............................. 645,000Total cost to be accounted for ....................... $767,000 Costs accounted for as follows:Cost of ending work in process inventory ...... $ 45,000Cost of units completed and transferred out .. 722,000Total cost accounted for ............................... $767,000Problem 4-14A (45 minutes)Weighted-Average Method1. Equivalent Units of ProductionMaterials Conversion Transferred to next department ........................ 450,000 450,000 Ending work in process:Materials: 80,000 units x 75% complete ......... 60,000Conversion: 80,000 units x 25% complete ...... 20,000 Equivalent units of production .......................... 510,000 470,0002. Cost per Equivalent UnitMaterials Conversion Cost of beginning work in process ................ $ 36,550 $ 13,500 Cost added during the period ....................... 391,850 287,300 Total cost (a) .............................................. $428,400 $300,800 Equivalent units of production (b) ................ 510,000 470,000 Cost per equivalent unit, (a) ÷ (b) ............... $0.84 $0.643. Applying Costs to UnitsMaterials Conversion TotalEnding work in process inventory:Equivalent units of production 60,000 20,000Cost per equivalent unit ....... $0.84 $0.64Cost of ending work in processinventory ........................... $50,400 $12,800 $63,200 Units completed and transferred out:Units transferred to the nextdepartment ....................... 450,000 450,000Cost per equivalent unit ....... $0.84 $0.64Cost of units completed andtransferred out .................. $378,000 $288,000 $666,000Problem 4-14A (continued)4. Cost ReconciliationCosts to be accounted for:Cost of beginning work in process inventory($36,550 + $13,500) .................................. $ 50,050Costs added to production during the period($391,850 + $287,300) .............................. 679,150Total cost to be accounted for ....................... $729,200 Costs accounted for as follows:Cost of ending work in process inventory ...... $ 63,200Cost of units completed and transferred out .. 666,000Total cost accounted for ............................... $729,200Problem 4-15A (45 minutes)Weighted-Average Method1. Equivalent units of productionMaterials Conversion Transferred to next department* ...................... 270,000 270,000 Ending work in process:Materials: 45,000 units x 100% complete ....... 45,000Conversion: 45,000 units x 60% complete ...... 27,000 Equivalent units of production .......................... 315,000 297,000 *Units transferred to the next department = Units in beginning work in process + Units started into production − Units in ending work inprocess = 35,000 + 280,000 − 45,000 = 270,0002. Cost per equivalent unitMaterials Conversion Cost of beginning work in process ................ $ 43,400 $ 20,300 Cost added during the period ....................... 397,600 187,600 Total cost (a) ..............................................Equivalent units of production (b) ................ 315,000 297,000 Cost per equivalent unit, (a) ÷ (b) ............... $1.40 $0.703. Cost of ending work in process inventory and units transferred outMaterials Conversion Total Ending work in process inventory:Equivalent units of production... 45,000 27,000Cost per equivalent unit ........... $1.40 $0.70Cost of ending work in processinventory ............................... $63,000 $18,900 $81,900 Units completed and transferred out:Units transferred to the nextdepartment ........................... 270,000 270,000Cost per equivalent unit ........... $1.40 $0.70Cost of units completed andtransferred out ....................... $378,000 $189,000 $567,000Problem 4-16A (45 minutes)Weighted-Average Method1. a. Work in Process—Blending .......................147,600Work in Process—Bottling .........................45,000Raw Materials .....................................192,600b. Work in Process—Blending .......................73,200Work in Process—Bottling .........................17,000Salaries and Wages Payable ................90,200c. Manufacturing Overhead ..........................596,000Accounts Payable ................................596,000d. Work in Process—Blending .......................481,000Manufacturing Overhead .....................481,000 Work in Process—Bottling .........................108,000Manufacturing Overhead .....................108,000e. Work in Process—Bottling .........................722,000Work in Process—Blending ..................722,000f. Finished Goods ........................................920,000Work in Process—Bottling ....................920,000g. Accounts Receivable .................................1,400,000Sales ..................................................1,400,000 Cost of Goods Sold ...................................890,000Finished Goods ...................................890,000Problem 4-16A (continued)2.Work in Process Work in Process© The McGraw-Hill Companies, Inc., 2013. All rights reserved.26 Introduction to Managerial Accounting, 6th EditionProblem 4-17A (60 minutes)Weighted-Average Method 1. Computation of equivalent units in ending inventory:Mixing Materials Conversion Units transferred to the next department ........ 60.0 60.0 60.0 Ending work in process: Mixing: 1 unit × 100% complete ................ 1.0 Materials: 1 unit × 20% complete .............. 0.2 Conversion: 1 unit × 10% complete ........... 0.1 Equivalent units of production ........................ 61.0 60.2 60.12. Costs per equivalent unit: Mixing Materials Conversion Cost of beginning work in process inventory .... $ 1,640 $ 26 $ 105 Cost added during the period ......................... 94,740 8,402 61,197 Total cost ...................................................... Equivalent units of production ........................ 61.0 60.2 60.1 Cost per equivalent unit ................................. $1,580 $140 $1,020© The McGraw-Hill Companies, Inc., 2013. All rights reserved.Solutions Manual, Chapter 4 27 Problem 4-17A (continued)3. Costs of ending work in process inventory and units transferred out: Mixing Materials Conversion Total Ending work in process inventory:Equivalent units of production .................... 1.0 0.20.1 Cost per equivalent unit ............................. $1,580$140 $1,020 Cost of ending work in process inventory .... $1,580 $28$102 $1,710 Units completed and transferred out:Units transferred to the next department ....60.0 60.0 60.0 Cost per equivalent unit ............................. $1,580 $140$1,020Cost of units transferred out ...................... $94,800 $8,400 $61,200 $164,400 4. Cost reconciliation: Cost to be accounted for:Cost of beginning work in process inventory ($1,640 + $26 + $105) .............................. $ 1,771Cost added to production during the period ($94,740 + $8,402 + $61,197) ................... 164,339Total cost to be accounted for ...................... $166,110 Costs accounted for as follows:Cost of ending work in process inventory ...... $ 1,710 Cost of units transferred out ......................... 164,400Total cost accounted for ............................... $166,110Problem 4-18A (30 minutes)Weighted-Average Method1. Total units transferred to the next department ... 30,000Less units in the May 1 inventory ...................... 5,000Units started and completed in May................... 25,0002. The equivalent units were:Materials Conversion Transferred to next department .................. 30,000 30,000Ending work in process:Materials: 4,000 units x 75% complete ..... 3,000Conversion: 4,000 units x 50% complete .. 2,000Equivalent units of production .................... 33,000 32,0003. The costs per equivalent unit were:Materials Conversion Cost of beginning work in process ................ £9,000 £4,400 Cost added during the period ....................... 57,000 30,800 Total cost (a) .............................................. £66,000 £35,200 Equivalent units of production (b) ................ 33,000 32,000 Cost per equivalent unit, (a) ÷ (b) ............... £2.00 £1.10 4. The ending work in process figure is verified as follows:Materials Conversion Total Ending work in process inventory:Equivalent units of production(see above) ................................. 3,000 2,000Cost per equivalent unit ................. £2.00 £1.10Cost of ending work in processinventory ..................................... £6,000 £2,200 £8,2005. Multiplying the unit cost figure of £3.10 per unit by 1,000 units does notprovide a valid estimate of the incremental cost of processing anadditional 1,000 units through the department. If there is sufficient idle capacity to process an additional 1,000 units, the incremental cost per unit is almost certainly less than £3.10 per unit because the conversion costs are likely to include fixed costs.。